Sensex sheds 126; ITC dips 3.5% as traders flee defensives

Moneycontrol Bureau

Shares tumbled Thursday, led by bruising declines in FMCG, banking and capital goods shares. With the October IIP data casting fresh doubts on the pace of economic recovery, and the political gridlock in the Parliament continuing, the mood has turned cautious for the time being, brokers said.
The 30-share Sensex shed 126 points to close at 19229.26, and the 50-share Nifty fell 36.50 points to close at 5851.50. Sellers targeted small and midcap shares that had risen sharply over the last couple of weeks. Market breadth on the NSE was markedly negative with more than two shares retreating for every one that rose.
Brokers say the near term outlook on the market remains bullish, but shares will have to digest the huge gains made in a short time. Most analysts say leading stocks are not cheap at current valuations as earnings growth will most likely remain sedate for some time.
ITC slumped after FTSE lowered its free float weighting for the cigarette maker in its global equity index series, according to the web site of the index provider. The changes, which are effecting as of the close of trade on December 21, would impact passive trackers of FTSE indexes. Citigroup said in a note the change in free float weighting could lead to selling of 36 million shares in ITC, amounting to USD 200 million.
FTSE also increased Kotak Mahindra Bank's free float weighting to 35 percent from 33 percent and IndusInd Bank's to 49 percent from 24 percent.
ITC shares closed down 3.5 percent, but IndusInd Bank gained 0.8 percent. Kotak Mahindra ended trade down 1.11 percent.
Shares in Hindustan Unilever fell nearly 2 percent, down for the second day, on concerns that it may face higher royalty payments to its parent Unilever PLC. Concerns came after Unilever Indonesia agreed on Wednesday to pay a higher royalty payment to the parent company.
Among the winners, shares of Tata Motors rose nearly 4 percent as the British Jaguar Land Rover unit shrugged off the slowdown in key markets to report strong growth. Sales at JLR, which accounts for a majority of Tata Motors' profits, last month increased 14 percent year-on-year to 29,893 vehicles, helped by continued demand for the Evoque SUV.
Shares of Jet Airways continued to fly high, second day in a row, closing up today 7.29 percent after Emirates Airlines said that it has renewed and expanded its partnership with the former. (more details)